Zephyr Energy Share Discussion Threads

[packman8] 14/10/2024 15:01

fenner66, watch the u-tube video on horizontal drilling and stimulation which might answer some of your queries raised.This is common practice in shale formations.

[molatovkid] 14/10/2024 14:24

I see, please then explain...

'A non-binding letter of intent (the "LOI") has been signed with a U.S.-based industry investor to fund 100% of the estimated cost of the extended lateral, on commercially attractive terms to all parties, with no issue of Zephyr's equity or any further exposure into the Paradox project.'

I would say that funding workover preparations, acidisation and testing would constitute 'further exposure'. Zephyr say they have none. That means you are wrong and the $7m covers everything.
End of debate.

[fenners66] 14/10/2024 11:56

No one seems to have passed a comment on the idea that the lateral needs to be 5500 ft.

WHY ?

I mean if you are drilling a well and come to the conclusion that you need to be over a mile away from where you drilled the vertical to ensure a better yield , isn't that the same as saying they drilled (to some extent) in the wrong place ?

However what I would question though is how they came up with 5500 ft in the first place?

Is that a finger in the air ? A guess ? Sufficiently far to justify a huge amount of money being spent - after all that is going to take some time...
Based on available data - not based upon drilling any more holes , does sound a bit like we looked at the data we had and drilled , but maybe we should have drilled over here instead.

They said the acidation was working , they say it will work , but the are also saying before the lateral that its necessary to get to the bulk of potential hydrocarbons....

[molatovkid] 14/10/2024 11:43

Jak, I said the 'contractual mortgage payment'....you should know what that means and if you don't then you really are out of your depth here.

[loglorry1] 14/10/2024 11:18

Jak what Molatovkid means is you don't have to repay the mortgate with all the rent you receive only the interest but it's a silly example as I've pointed out. You pay the principle at the end of the mortgage. This is different from what we are proposing is likely with ZPHR because we are saying the finance provider gets *all* cashflows until repaid.

[paddyfool] 14/10/2024 10:35

All company boards will have an element of managing their shareprice. Ask anyone involved at board level in a listed company and they will tell you so. The board have a responsibility to its shareholders to protect their shareholders investment. The board may believe that there is a significant discrepancy between the existing market value and what they perceive to be its true value. In this instance they are almost compelled to act. Now I am not saying that this is the case here, how would I know? But I am saying that boards do sometimes feel the need to intervene. Hence you could read the current intervention as one such case where there is a high level of confidence that something will happen but that the final details are not yet completely agreed but will be in due course and that they fear a run on the shares because there is a strong view in the market that a raise will be coming. Have sat on many boards, and known many others who have also sat on boards then this is what would happen.

[jaknife] 14/10/2024 10:33

molatovkid,

"Jak, that’s not the case though is it? Take a but to let mortgage and you make the contractual mortgage payment and any extra from the rental income is yours."

FFS!

You've literally just written:

"Take a buy-to-let mortage and, provided that the mortgage is paid *first*, then you can keep what's left over."

You're giving an example that agrees with me!

The bank always gets paid first, it's the (my*) first rule of finance!

JakNife

* - speaking as a former investment banker

[molatovkid] 14/10/2024 10:15

Jak, that's not the case though is it? Take a but to let mortgage and you make the contractual mortgage payment and any extra from the rental income is yours.

[fenners66] 14/10/2024 09:32

molatovkid - Guess you are not a lawyer then. Reading and seeing the detail are 2 different things. You saw what you wanted to. Log has spelled out that is not the same as the detail as written.

Meanwhile back to the question I posed - given the deal is not done
given there is no actual detail of how the deal will be structured

what was the point of the announcement at this stage ?

I said , I suspect it is the company trying to manage the share price - rather than managing its business which if done
well takes care of the share price on its own.

So that leads me to question what is in it for them to manage the share price at this time?

Since no one else has volunteered anything...
possible outcomes for a "company"

1, supported share price means easier to raise funds from sale of new shares.
2, raise more funds for someone selling existing shares
3, maybe share price supports some bonus scheme
4, sometimes a higher price supports warrants conversion

Any ot these or others apply here ?

[paddyfool] 14/10/2024 08:35

Truth is none of us has a clue. They have decided that until the deal is closed details won't be published. So we are all guessing and interpreting the English on the announcement trying to put substance and assumption where there is fresh air. That said here's my guess! 80-100% of the third party investment paid out first and then 10% thereafter all off gross production.

[jaknife] 14/10/2024 08:07

molatovkid,

"As the finance provider is a minority interest, it seems natural they would receive 36-2R revenues in proportion to their holding."

Finance providers (aka "banks", "hedge funds", "lenders", etc) always get paid *first*!

Not "after", not "in proportion", not "at the same time" but *first*!

JakNife

[loglorry1] 14/10/2024 07:29

Yes exactly! The RNS says they are paying 100% of the lateral yet the lateral AND workover is estimated to be $7m. Who is paying for the workover?

"As the finance provider is a minority interest, it seems natural they would receive 36-2R revenues in proportion to their holding."


LOL! "seems natural! " You do make me laugh. If this is the case then why not just say so? It's not "natural" it all depends on what is stated in the contract the details of which we may never know until the AR comes out.

If this is the case then why not just say so? It would be very easy to write

"The funding partner will receive revenues net of operating costs in proportion to their minority stake as revenues are produced".

[molatovkid] 14/10/2024 06:50

As the finance provider is a minority interest, it seems natural they would receive 36-2R revenues in proportion to their holding.

[molatovkid] 13/10/2024 18:00

‘The proposed length of the extended lateral is expected to be 5,500 feet and the cost of the operation is expected to be circa US$7 million (including the workover preparations on the existing well, the drilling of the lateral extension, acidisation and the well production test).’

AND

'A non-binding letter of intent (the "LOI") has been signed with a U.S.-based industry investor to fund 100% of the estimated cost of the extended lateral, on commercially attractive terms to all parties, with no issue of Zephyr's equity or any further exposure into the Paradox project.'

So there you go - No FURTHER EXPOSURE and the way that is phrased 'extended lateral' includes all the preparation.

Read guys read.

[fenners96] 13/10/2024 15:31

Log off, log on, log off... what a waste of a weekend! Hilarious.

[loglorry1] 13/10/2024 15:21

What you write JakNife is consistent with the RNS. I'm not saying this is what is proposed but the simple fact is that the RNS is written in a way that allows for all sorts of scenarios where the partner is taking very little risk.

The bulls in a lazy way will read it as the partner is stumping up $7m and paying for all the future work on the 32-2R well in return for a minority share of revenue.

However the RNS is actually quite clear in splitting out the work over work on the vertical and the lateral work and then stating the partner is proposing to pay for the lateral. They say the total is estimated to be $7m but they don't say what the partner is paying because they only say the partner is paying for the lateral.

It also is quite clear in allowing the partner first call on any resulting revenues from either the vertical or the lateral, or most likely both. It also does not stipulate how much the partner must spent to be able to benefit from the vertical or lateral. For all we know they could drill 200ft hit some high pressure pocket and then say "sorry guys we'll just produce from the vertical to get our money back now".

As you point out we have no idea what interest rate ZPHR are paying for this funding and what assets they are pledging in return. It could be backed by the Williston investment (after the RBL).


It's all just another instance of obfuscating something that is easy to make clear but they choose not to.

Oh and its also only a non-binding proposal anyway.

It's not all doom and gloom though. I suspect the conversation went along the lines of Colin saying "Hey we could produce from the vertical with a bit of a workover but if we spend a bit more and drill a lateral it could be even better". Partner came back and said we'll lend you $7m at 15% for 49% of the well revenue once you do the work over and show you can get a sustained flow and you can use this to drill the lateral part and if what you say is true we'll all do well. If the lateral fails we'll get out money back by producing from the worked over vertical.

[jaknife] 13/10/2024 14:20

I'd do that deal, wouldn't you loglorry1?

A. Zephyr pay for the workover of the existing well and demonstrate an adequate flow rate that will provide cash flows to repay a $7m loan with a decent buffer of excess cash flows.

B. Lender takes a first lien over the newly worked-over well and 36-2R and provides the $7m loan secured on those two assets.

C. If the lateral fails then cash flows from the the existing well repay the loan. If the lateral succeeds then the loan gets repaid quicker.

Say interest at 12% plus fees?

JakNife

[loglorry1] 13/10/2024 13:58

No, they said they would fund 100% of the lateral but the lateral plus the work over estimate is $7m (if it's done to full extent) so its possible ZPHR are having to pay some of the workover part and also possible they won't drill all the lateral but still have first call on any resulting revenue.

They could have said the LoI commits to carry ZPHR for $7m of work in return for a 40/60% revenue split of resulting sales. That would be clear but instead we get something which can be interpreted differently .

[molatovkid] 13/10/2024 13:35

'A non-binding letter of intent (the "LOI") has been signed with a U.S.-based industry investor to fund 100% of the estimated cost of the extended lateral'Maybe worth reading it!

[loglorry1] 13/10/2024 12:51

Molatovkid - nowhere in the RNS does it say that ZPHR will not need to contribute to the $7m funding.

They say they intend to enter into the agreement to fully fund the lateral (which they say will cost $7m including a work over). For all we know ZPHR are paying half.

[loglorry1] 13/10/2024 12:43

Tag if that were the case they'd say so. You need to realize that all RNSs are written in such a way as to always point out the positives and if at all possible hide or omit any negatives.

If you start inventing all sorts of positives than don't exist, and assume the company to have forgotten to include them in an RNS, then you are for sure not going to make any money. People should understand this before they invest a penny. Sadly, most PIs just want to believe something, so they just assume it's true.